UBS recovers with a small profit in third quarter

UBS, the Swiss banking giant, today showed signs of recovery with a small profit in the third quarter, a development that came in the wake of growing crisis of confidence in Europe’s banks, analysts said.

After suffering the worst losses from the US housing meltdown, the Swiss bank which was forced to a huge writedown of over $ 42 billion seems to have bucked the trend of increasing worries by depositors in various countries.

UBS announced that it disposed of its US commercial and residential mortgage-related holdings to prepare to the ground for profits next year. “Neutral observers attribute this to be the fact that we addressed many of the root causes of this crisis soon enough, through an early recapitalisation of the bank and a far-reaching recalibration of our business model,” UBS chairman Peter Kurer said in a speech to an extraordinary shareholder meeting in Basel 2009, said Kurer, would be “an overall profitable year” notwithstanding the current storm in the markets. “I am happy to report UBS has fared reasonably well through this turmoil of the last weeks,” the UBS chairman maintained, suggesting the situation is extremely precarious.

UBS shares rose as much as 8.9 per cent in Swiss trading as banks in Switzerland described the results as a positive development. The world’s biggest money manager for the rich, UBS plans to bring down its investment bank’s balance sheet to Sfr 1.75 trillion by the end of this year.

Kurer said his top priority is to bring UBS to positive flows in the wealth management and asset management businesses. He, however, remained silent on whether the bank had faced a situation in which some of its rich depositors fled to other banks. Meanwhile, members of the European Union are unable to reach consensus on whether they should create a special fund for protecting the financial system that has come under unprecedented stress due to the worsening credit crisis. France which underscored the need for special fund “ to support the financial sector” could not get an approval from Germany and other North European countries.

On Monday, the Irish government resorted to an extraordinary measure by declaring a blanket guarantee for two years on all deposits at six big banks and protection for other creditors including bond holders. The Irish move put pressure on other European governments to provide such a cushion because of the worsening financial crisis, analysts said, suggesting that if one government adopts blanket measures others will be forced to follow suit.

Already, Fortis and Dexia in Belgium, Hypo Real Estate in Germany, Glitnir and Bradford & Bingley in Britain had to be rescued over the last five days. Clearly, there is a need to shore up confidence in the banks by taking pragmatic and prudential steps, analysts pointed. profitable year” notwithstanding the current storm in the markets. “I am happy to report UBS has fared reasonably well through this turmoil of the last weeks,” the UBS chairman maintained, suggesting the situation is extremely precarious.

UBS shares rose as much as 8.9 per cent in Swiss trading as banks in Switzerland described the results as a positive development. The world’s biggest money manager for the rich, UBS plans to bring down its investment bank’s balance sheet to Sfr 1.75 trillion by the end of this year.

Meanwhile, members of the European Union are unable to reach consensus on whether they should create a special fund for protecting the financial system that has come under unprecedented stress due to the worsening credit crisis. France which underscored the need for special fund “ to support the financial sector” could not get an approval from Germany and other North European countries.

On Monday, the Irish government resorted to an extraordinary measure by declaring a blanket guarantee for two years on all deposits at six big banks and protection for other creditors including bond holders.

The Irish move put pressure on other European governments to provide such a cushion because of the worsening financial crisis, analysts said, suggesting that if one government adopts blanket measures others will be forced to follow suit.

Already, Fortis and Dexia in Belgium, Hypo Real Estate in Germany, Glitnir and Bradford & Bingley in Britain had to be rescued over the last five days. Clearly, there is a need to shore up confidence in the banks by taking pragmatic and prudential steps, analysts pointed.